Agriculture: Amber Waves of Debt

Amber Waves of Debt

The loss was the largest ever suffered by a U.S. financial institution. But the victim was not a big-city bank with billions of dollars on loan to Mexico and Brazil. Instead, it was the Farm Credit System, a farmer-owned cooperative of 37 banks and 522 credit associations that makes agricultural loans. The F.C.S.'s 1985 deficit of $2.7 billion, reported last week, far surpassed the record $1.08 billion loss suffered by Continental Illinois bank in 1984.

The cause of the F.C.S.'s red ink is no mystery: the farm belt continues to suffer from its worst depression since the 1930s. Squeezed between low...